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WOODLAND HILLS, CA-Younan Properties is forming a new commercial debt group that will invest up to $200 million in underperforming loans and distressed office properties. The privately held Woodland Hills-based firm will look for deals ranging from $5 million to $50 million throughout the country, targeting mispriced mezzanine loans, B notes, whole loans and nonperforming first mortgages.

According to Zaya S. Younan, chairman and CEO of Younan Properties, the current instability in the debt markets and “the inability of lenders to hold an underperforming loan while the property is stabilized” provide excellent opportunities to acquire debt at discounted prices for key assets in major markets. Younan says that his new debt group will look for situations where it can actively assist in the management of the property with a view toward increasing cash flows so that the property can meet its debt service.

The Younan CEO calls the new debt group a natural extension of the company’s core business. The firm has significant experience with distressed assets in both acquisition and turn-around situations, having built the value of its portfolio in value-add plays where it has identified opportunities to improve efficiencies, reduce costs and increase an asset’s value.

Younan notes that since January of this year, the market for commercial mortgage bonds has frozen, as “Spreads on top-rated paper have swelled to levels customarily seen in the high-yield -debt market.” Many investment banks are looking to sell a huge inventory of commercial mortgages that were originated before the credit crunch took hold and now are under significant pressure to perform, he adds.

Younan, who debuted this week as a blogger for GlobeSt.com, observes that commercial real estate “has entered into a period where there will be fewer opportunities to acquire premium assets directly on acceptable terms,” as his firm has done throughout its accumulation of nearly 12 million sf of class A office properties. The firm owns buildings valued at more than $1.6 billion in key markets in Texas, Illinois and Arizona.

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